W Company’s ROE ( return on equity ) using direct method and with the help of DuPont identity. Introduction: Return on equity (ROE): ROE is the amount of net income which is earned from the percentage of shareholders equity. It measures the profitability of a company through the value of shareholder equity. Return on equity (ROE) using DuPont identity. ROE can be determined by using the method of DuPont identity with the help of three main elements as follows: Profit margin Asset turnover ratio Equity multiplier

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Answer 1

Question

Chapter 2, Problem 42P

a)

Summary Introduction

To determine: W Company’s ROE (return on equity) using direct method and with the help of DuPont identity.

Introduction:

Return on equity (ROE):

ROE is the amount of net income which is earned from the percentage of shareholders equity. It measures the profitability of a company through the value of shareholder equity.

Return on equity (ROE) using DuPont identity.

ROE can be determined by using the method of DuPont identity with the help of three main elements as follows:

Profit margin

Asset turnover ratio

Equity multiplier

b)

Summary Introduction

To compare: The two firms (W Company and C Company) return on equity using DuPont identity.

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Crenshaw, Incorporated, is considering the purchase of a $367,000 computer with an economic life of five years. The computer will be fully depreciated over five years using the straight-line method. The market value of the computer will be $67,000 in five years. The computer will replace five office employees whose combined annual salaries are $112,000. The machine will also immediately lower the firm's required net working capital by $87,000. This amount of net working capital will need to be replaced once the machine is sold. The corporate tax rate is 22 percent. The appropriate discount rate is 15 percent. Calculate the NPV of this project. Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. NPV Answer is complete but not entirely correct. S 103,141.80

Your firm is contemplating the purchase of a new $610,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $66,000 at the end of that time. You will save $240,000 before taxes per year in order processing costs, and you will be able to reduce working capital by $81,000 (this is a one-time reduction). If the tax rate is 21 percent, what is the IRR for this project? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. IRR %

Answer 2

Question

Chapter 2, Problem 42P

a)

Summary Introduction

To determine: W Company’s ROE (return on equity) using direct method and with the help of DuPont identity.

Introduction:

Return on equity (ROE):

ROE is the amount of net income which is earned from the percentage of shareholders equity. It measures the profitability of a company through the value of shareholder equity.

Return on equity (ROE) using DuPont identity.

ROE can be determined by using the method of DuPont identity with the help of three main elements as follows:

Profit margin

Asset turnover ratio

Equity multiplier

b)

Summary Introduction

To compare: The two firms (W Company and C Company) return on equity using DuPont identity.

Expert Solution & Answer

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Answer 3

Question

Chapter 2, Problem 42P

a)

Summary Introduction

To determine: W Company’s ROE (return on equity) using direct method and with the help of DuPont identity.

Introduction:

Return on equity (ROE):

ROE is the amount of net income which is earned from the percentage of shareholders equity. It measures the profitability of a company through the value of shareholder equity.

Return on equity (ROE) using DuPont identity.

ROE can be determined by using the method of DuPont identity with the help of three main elements as follows:

Profit margin

Asset turnover ratio

Equity multiplier

b)

Summary Introduction

To compare: The two firms (W Company and C Company) return on equity using DuPont identity.

Expert Solution & Answer

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Answer 4

Question

Chapter 2, Problem 42P

a)

Summary Introduction

To determine: W Company’s ROE (return on equity) using direct method and with the help of DuPont identity.

Introduction:

Return on equity (ROE):

ROE is the amount of net income which is earned from the percentage of shareholders equity. It measures the profitability of a company through the value of shareholder equity.

Return on equity (ROE) using DuPont identity.

ROE can be determined by using the method of DuPont identity with the help of three main elements as follows:

Profit margin

Asset turnover ratio

Equity multiplier

b)

Summary Introduction

To compare: The two firms (W Company and C Company) return on equity using DuPont identity.

Expert Solution & Answer

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Answer 5

Chapter 2, Problem 42P

a)

Summary Introduction

To determine: W Company’s ROE (return on equity) using direct method and with the help of DuPont identity.

Introduction:

Return on equity (ROE):

ROE is the amount of net income which is earned from the percentage of shareholders equity. It measures the profitability of a company through the value of shareholder equity.

Return on equity (ROE) using DuPont identity.

ROE can be determined by using the method of DuPont identity with the help of three main elements as follows:

Profit margin

Asset turnover ratio

Equity multiplier

b)

Summary Introduction

To compare: The two firms (W Company and C Company) return on equity using DuPont identity.

Answer 6

Chapter 2, Problem 42P

a)

Summary Introduction

To determine: W Company’s ROE (return on equity) using direct method and with the help of DuPont identity.

Introduction:

Return on equity (ROE):

ROE is the amount of net income which is earned from the percentage of shareholders equity. It measures the profitability of a company through the value of shareholder equity.

Return on equity (ROE) using DuPont identity.

ROE can be determined by using the method of DuPont identity with the help of three main elements as follows:

Profit margin

Asset turnover ratio

Equity multiplier

Answer 7

Chapter 2, Problem 42P

a)

Summary Introduction

To determine: W Company’s ROE (return on equity) using direct method and with the help of DuPont identity.

Introduction:

Return on equity (ROE):

ROE is the amount of net income which is earned from the percentage of shareholders equity. It measures the profitability of a company through the value of shareholder equity.

Return on equity (ROE) using DuPont identity.

ROE can be determined by using the method of DuPont identity with the help of three main elements as follows:

Profit margin

Asset turnover ratio

Equity multiplier

Answer 8

b)

Summary Introduction

To compare: The two firms (W Company and C Company) return on equity using DuPont identity.

Answer 9

b)

Summary Introduction

To compare: The two firms (W Company and C Company) return on equity using DuPont identity.

Answer 10

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Answer 11

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Answer 12

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Answer 13

Ch. 2.1 - Prob. 1CC Ch. 2.1 - Prob. 2CC Ch. 2.2 - Prob. 1CC Ch. 2.2 - Prob. 2CC Ch. 2.2 - Prob. 3CC Ch. 2.3 - What it is the difference between a firms gross...Ch. 2.3 - What is the diluted earnings per share?Ch. 2.4 - Prob. 1CC Ch. 2.4 - Prob. 2CC Ch. 2.5 - Prob. 1CC

Solution Summary: The author explains W Company's return on equity using direct method and with the help of DuPont identity.

To compare: The two firms (W Company and C Company) return on equity using DuPont identity.

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Chapter 2 Solutions